Marijuana Tax Issues

The acceptance of Medical Marijuana in Michigan has opened up some major confusion on the legality and taxation of activities related to the production, distribution, and sale of cannabis.

While many activities are legal for the State of Michigan, the IRS has not changed its position of marijuana being an illegal substance. The Federal Government's position has been reinforced by both the U.S. Attorney General and the Department of Justice. The latest statement from the Federal Government states:

Marijuana remains illegal.

Federal Prosecutors retain enforcement authority.

Will focus on drug trafficking and sales to minors.

No prosecution of those following State laws.

The IRS requires you to report all revenue/sales of marijuana as business income. The general consensus is that the IRS will not share tax return information with law enforcement officials. The IRS does not recognize the general practice of accepting "donations" or "gifts". All monies received directly or "indirectly" related to a transfer of cannabis will be treated as revenue/sales of a business.

Please keep in mind that Al Capone was sent to jail for tax evasion and not for any of his criminal activities.

The IRS tax regulations related to tax preparers requires that preparers either turn away work related to marijuana or perform more tests and work papers than otherwise necessary. In no way may a tax preparer or attorney aid or abet a person to break the law. In order to take advantage of legal tax deductions, you must keep reliable and accurate records. All tax preparers will be requiring a signed statement from the owner stating that (A) They understand the requirements of the State and local laws and (B) They intend to comply at all times.

To receive a copy of our summary, please send and e-mail to [email protected].

We also offer an one hour consultation on the tax issues related to Medical Marijuana for $100.00